WASHINGTON — Almost four months after it was first announced, the Treasury Department late Wednesday rolled out a scaled-back version of its long-awaited plan to purchase jointly with the private sector bad mortgage-based assets plaguing the nation's banks.

The heads of Treasury, the Federal Deposit Insurance Corp. and the Federal Reserve announced the terms of the public-private partnership to purchase the so-called toxic assets that remain at the heart of the global financial crisis. It will be one to three more months before the program becomes operational.

Although once expected to cost taxpayers hundreds of billions of dollars, the Treasury Department will invest $30 billion initially, alongside $10 billion from select private sector firms. The program can be expanded quickly if economic conditions deteriorate, regulators said.

The Obama administration hopes that these private investors, subsidized by the government, will snap up mortgage-backed securities.

The securities expanded mortgage finance over the past two decades, but there's been virtually no market for them since 2007 when the housing meltdown began because many of the mortgages packaged into the securities are no longer being paid. That's made the securities difficult to price. That, in turn, led the banks that own them to be skittish about making new loans.

The resulting slowdown in credit has contributed to economic stagnation.

"We're not trying to be the market. We're trying to jump-start the market, and that ($40 billion) is a significant amount of capital" for that purpose, said a senior Treasury official briefing reporters. The official spoke on the condition of anonymity to speak freely.

Nine fund managers approved by Treasury will bid against each other for mortgage assets that banks and other financial institutions might be willing to sell. By competitive bidding, the nine firms should set a market price for the assets, which could guide the broader mortgage-securities market.

The program won't be transparent for ordinary citizens, despite widespread criticism of the fuzzy disclosure of terms in other Wall Street bailouts. Treasury will provide quarterly reports, but it doesn't plan to disclose whether the assets are selling for 10 cents on the dollar of their face value, or 30 cents, or any other reference price.

"There is a great deal of competitive information that needs to be protected," the senior Treasury official said. "It's a process we're working through now."

Trillions of dollars worth of bad mortgage-backed securities sit on bank balance sheets, but banks have refused for almost three years to sell them at giveaway prices.

It's not clear whether Treasury will compel banks with the most taxpayer bailout money — Citigroup and Bank of America — to sell their bad assets. Banks may prefer to try to grow their way out of their predicament, which would shrink the ratio of their bad assets against their total loans over time, but delay their returning to robust lending.

More than 100 firms applied to be qualified fund managers. The nine were selected after a two-month evaluation process. They now have four to 12 weeks to raise at least $500 million each in capital to bid on mortgage-backed securities. The pools of mortgages accepted for auction in the Treasury plan must have had the highest rating — AAA — at the time of issuance.

Pacific Investment Management, the world's biggest bond fund, last month dropped its bid to join the program "as a result of uncertainties regarding the design and implementation," spokesman Mark Porterfield said. In March, the PIMCO's co-founder had described the program as a win-win-win, good for government, banks and investors.

"We continue to believe that it is important for the public and private sectors to work together to resolve the financial crisis and improve the economic outlook," Porterfield said.

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